Silicon Vallecitos: South America's Booming Software Capitals in Colombia and Ecuador
Many North American companies needing quick access to software development talent for their digital business needs are still casting about for the right software outsourcing solution. Offshoring has been popular for decades, but time zone and cultural divides remain big obstacles.
Nearshoring staff augmentation with distributed teams in other countries located closer to North American shores is turning out to be the preferred alternative. Remaining in the Western Hemisphere minimizes both time and cultural differences, offering greater opportunities for real-time collaboration. Happily, South America has become a vibrant new international hub of talented developers. And two cities in particular are leading the charge: Medellin, Colombia, and Quito, Ecuador.
While Bogota is still Colombia’s largest and most cosmopolitan city, temperate Medellin is quickly catching up, and both are contributing to Colombia’s fast growth, albeit in very different ways.
Bogota’s tech scene began to stir in the early 2000s, then expanded to the newer hub, Medellin, by the next decade. Although Bogota still leads the country regarding access to venture capital, investment in Medellin is rapidly growing to meet the needs of the startup community.
Once infamous for its association with international drug cartels, Medellin is going through a full-blown revitalization. On one hand, it is tackling its urban problems, for instance with innovative escalators which help connect the slums with other neighborhoods. On the other hand, it is also working on consolidating itself as a tech hub.
Medellin’s newer startup scene has contributed to the establishment of a smaller, cohesive group of entrepreneurs in the city. Its Innovation District is home to more than 150 tech companies from over 22 countries. Tech companies in the District benefit from multiple economic development initiatives led by the local nonprofit group Rutan Medellin.
Colombia as a whole has seen many startup successes, spurred in large part by programs supporting technological innovation and business leadership. Colombia Startup is the Colombian equivalent of TechCrunch Disrupt for Colombian investors and entrepreneurs. The forum gives upstarts the opportunity to pitch their ventures to the global investment community: business angels, venture capitalists, seed capital providers, and private equity funds worldwide.
Medellin’s climate and quality of life have made it an attractive destination for digital nomads – more so than Bogota. While Bogota is a much bigger city, the international community in Medellin is expanding very quickly and is intimately connected through social networks in a way that Bogota’s is not. One example is that the Digital Nomads Medellin Facebook group has almost 3,500 members, while Bogota has no such groups. Medellin also has
Medellin has flight connections to Panama, Miami, Houston, and New York. More U.S. cities are coming online each year as Medellin’s reputation grows. While Bogota’s international networks and access to capital are a serious advantage, the cost and quality of life in Medellin far compare favorably to that of the capital.
Quito, the capital of Ecuador with a population of just under 2.7 million, has a long history with its technology industry. The city has become a hub for small- and medium-sized software development companies. Lately it has seen steady growth in the sector and a renewed interest in entrepreneurship in the tech industry.
Quito is the core site for the ITO/ BPO (Information Technology Outsourcing / Business Process Outsourcing) sectors because of the local concentration of great talent, a maturing software industry, and a relatively lower cost of labor compared to other South American cities. The ITP/BPO industry is worth over $600 million nationally and one in which professionals are relatively well paid, but still offer significant value for the money.
Quito has seen bounding growth in the software development business in the last few years, especially in terms of outsourcing. In the past there were few middle size companies offering specific domain software. Now, many companies of all sizes are engaged in IT outsourcing. The local market has long since accepted the outsourced model but the majority of these companies are now selling outside Ecuador.
Quito is still the center for software development in Ecuador, largely because It is the nation’s capital and historically one of the biggest buyers of this type of services has been government clients. As the nation’s second largest city, it enjoys the country’s best infrastructure and bandwidth overall. Quito also has many good universities that offer Computer Science careers.
Located between two vast Andean mountain ranges and overlooked by snow-capped volcanoes, the city of Quito is typically a stop-off for travellers visiting the Galápagos Islands, 864 miles west in the Pacific. Quito is becoming a strategic commercial hub with a noticeable increase in foreign buyers, mainly from the US and Canada.
Affordability is another key attraction, especially for retirees — Ecuador does not tax Americans’ social security income; trips to the doctor are cheaper than in the US; and property taxes are considered low when compared to Europe, with further discounts available for homeowners over the age of 65. There are plans for new business centers and high-end hotels located near Quito’s Mariscal Sucre international airport, which has daily direct flights from over a dozen US cities including Miami, Houston, Dallas, New York, Charlotte, Chicago and Philadelphia.
Nearshoring activity is a big driver for these two booming economies.
One company that’s representative of both the burgeoning tech industry itself and its geographic concentration in these two “Silicon Vallecitos” is Jobsity, a software development company serving mainly North American corporations and agencies who need to build out new platforms for their businesses. Jobsity has 60 employees working in distributed teams across four locations including New York City and Cartagena, but mainly concentrated in Quito and Medellin. Outsourcing firms such as Jobsity are attracted to the spectacular quality of life and rich cultural diversity of these two cities.
Jobsity’s headquarters is located in Quito, tucked away in the foothills of the city, complete with verdant gardens and stunning mountain views. They make their own guacamole from avocado trees found on the property, and often relax in the office Jacuzzi after work. On weekends, the Quito staff can be found hiking the nearby Andes mountains, listening to music in the city’s historical center and visiting the thriving art scene that has emerged in the city over the past decade.
“We chose Quito because we already loved the city, but more important, it has a wide selection of top talent to choose from as our company has needed to ramp up operations to serve a growing body of North American clients,” says Andres Garzon, CEO of Jobsity. The company opened its Quito headquarters in 2007, and the Medellin office opened in 2016.
Nearshoring allows North American companies needing to outsource their development projects to communicate within the same or similar time zones, as opposed to dealing with a reversed schedule of day and night. There’s a lot of frustration, slowed communication and often times cultural barriers with traditional offshoring locations in developing Eastern Hemisphere countries. As the software tech industry continues to develop in Colombia and Ecuador (along with other South American countries like Argentina, Brazil, and Chile), more US and Canadian firms are looking southward for their outsourcing.
It’s a trend that’s not likely to end any time soon.